Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Acknowledged
Financial resilience of the water sector has weakened significantly across many companies
Conclusion
The financial resilience of the water sector has weakened. While Water UK pointed out to us that some companies are resilient, Ofwat has signalled its concerns about the financial resilience of 10 of the 16 major companies.60 In 2023–24, 10 companies could not cover their interest payments with cash from operations.61 Defra told us that Ofwat has powers to prevent companies from paying dividends if their financial resilience is insufficient, known as “cash lock-up”. Ofwat told us that it is exercising this power for three companies currently, including Thames Water.62 The Consumer Council for Water told us that Thames Water is the extreme case of increased financial risk.63 We noted that Thames Water is now having to seek new investors to remain solvent, since it only has enough cash to stay afloat until 2026.64
Government Response Summary
The government is concerned about the financial resilience of the water sector, notes Ofwat's powers to prevent dividend payments, and is committed to working with Ofwat to ensure water companies are financially resilient.
Government Response
Acknowledged
HM Government
Acknowledged
The Government is concerned about the financial resilience of the water sector. Ofwat has powers to prevent companies from paying dividends if their financial resilience is insufficient, known as “cash lock-up”. Ofwat has signalled concerns about the financial resilience of some companies and is actively monitoring the situation. The Government is committed to working with Ofwat to ensure that water companies are financially resilient and able to invest in the infrastructure and services that customers need.